Use a model of the dollar-euro foreign exchange market to illustrate how the value of the dollar is determined in terms of the euro. Identify two factors that would increase the value of the dollar in terms of the euro.
What will be an ideal response?
See Figure 36.1 in your text for the model. The value of the dollar in exchange markets is determined by the market forces of supply and demand. The value of the dollar might increase in terms of the euro if European businesses purchase more U.S. goods and services (increasing the demand for dollars) or if the interest rate in the United States increases relative to the interest rate in Europe.
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Economists study
A) the choices people make, but not the consequences of their choices. B) the consequences of peoples' choices, but not the choices themselves. C) the choices people make in a world where resources are scarce. D) theories and ignore all the facts. E) data rather than people.
When the price level falls, the number of dollars needed to buy a representative basket of goods
a. increases, so the value of money rises. b. increases, so the value of money falls. c. decreases, so the value of money rises. d. decreases, so the value of money falls.
Very few players are drafted into the NFL when they play at Division II or Division III schools whereas more players are drafted in the MLB from these schools. What can explain this?
A) Attending a Division II or Division III school sends a stronger signal of future and present quality in the NFL. B) Attending a Division II or Division III school sends a weaker signal of future and present quality in the MLB. C) A signal of future and present quality is more important in the MLB than in the NFL. D) Attending a particular school is like a screening test for life insurance.
________ increases with education, training, and job experience. i. Physical capital ii. Human capital iii. Financial capital
A) i only B) ii only C) iii only D) Both ii and iii E) i, ii, and iii